Tax deductions: 12 ways to save, from mortgage interest to moving costs
Tax deductions can require some extra reading of instructions, but there's big money to be saved when you file your tax return.
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Alimony. You can deduct alimony payments, but the IRS doesn't give any deduction for child-support payments.Skip to next paragraph
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Disaster losses. The IRS casts a helpfully wide net on this one, including theft or other unusual events "such as a flood, hurricane, tornado, fire, earthquake or even volcanic eruption." Generally you may deduct related losses of property relating to your home, household items, or vehicles. But the tax agency says that for losses covered by insurance, you must file timely claims and reduce the deduction by the amount of any reimbursement.
Home mortgages. Yep, this is the ever-popular mortgage interest deduction, which pushes many families into the "itemizing" category. In addition to deducting the interest portion of monthly home payments, you can also deduct a "points" fee paid when taking out the home loan.
Taxes. Property taxes, plus state and local income taxes, offer sizable deductions for millions of households. You can also claim state or local sales taxes, but this is as an alternative (not in addition) to deducting income taxes.
Charitable gifts.You can list gifts to qualified charitable organizations as one of your itemized deductions on Schedule A. Hang onto documentation of each gift. And remember that if you receive a benefit because of your contribution, such as a mug or a symphony ticket, you can deduct only the amount that exceeds the fair market value of that benefit.
Medical and dental expenses. You can deduct medical expenses during the calendar year that exceeded 7.5 percent of your adjusted gross income. Apparently people have pushed the limit on this deduction sometimes, prompting the IRS to add some footnotes: "You may not deduct funeral or burial expenses, over-the-counter medicines, toothpaste, toiletries, cosmetics, a trip or program for the general improvement of your health, or most cosmetic surgery. You may not deduct amounts paid for nicotine gum and nicotine patches, which do not require a prescription."
Business deductions. Even if you don't run your own business, some work-related costs may be deductible. One example is the cost of necessary transport from one workplace (away from home) to another. If you run a business, a host of deductions are available, including travel expenses, business use of a car, and business use of your home.
Finally, remember that in addition to deductions you may qualify for tax credits, based on things like your income level or on events like adoption, that will further lower your tax bill.
All this may mean plowing through a lot of paperwork, but it brings a payback.
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